Consumer Rights & Complaints

• Topic 01

  Consumer Rights & Complaints

  52 questions

A few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.

1. A complainant receives a FOS decision awarding them £15,000 in redress. The complainant believes their actual loss is £40,000 and does not accept the FOS award. The complainant then commences court proceedings against the firm for £40,000. What is the legal position?

   • A
     The complainant may pursue court proceedings for the full amount; by not accepting the FOS award they retain the right to litigate, though the court may take the FOS decision into account as evidential context
     Correct answer
   • B
     The complainant cannot pursue court proceedings because using the FOS process is legally equivalent to a binding arbitration agreement
   • C
     The complainant is limited to claiming the £15,000 FOS award amount in court and cannot seek a higher sum
   • D
     The complainant can pursue court proceedings but must first repay the £15,000 FOS award to the firm
   Explanation

   FOS decisions are not binding on the complainant. By rejecting the FOS award, the complainant retains their right to pursue court proceedings. They are not limited to the FOS award amount in court and can claim their full alleged loss of £40,000. The court proceedings start afresh, but the court will be aware that FOS considered the complaint and reached a particular conclusion — this may carry evidential weight but does not bind the court. This asymmetry (binding on the firm, not on the complainant) is deliberate: it protects consumers while ensuring firms must comply with FOS decisions that complainants choose to accept.

2. A homeowner holds: (a) a home buildings insurance policy (£350,000 cover); (b) a life assurance policy (surrender value £120,000); and (c) a bank account (balance £100,000) — all with the same authorised insurance group that becomes insolvent. What does the FSCS pay for each product?

   • A
     (a) £85,000; (b) £85,000; (c) £85,000 — total £255,000
   • B
     (a) £85,000; (b) 100% = £120,000; (c) £100,000 (fully protected)
   • C
     (a) £350,000 (100%); (b) £120,000 (100%); (c) £100,000 (100%) — all fully protected
   • D
     (a) Home insurance (non-compulsory general): 90% of a valid claim; (b) Life assurance (long-term insurance): 100% = £120,000; (c) Bank deposit: £85,000 protected (£15,000 unprotected)
     Correct answer
   Explanation

   Each product has a different FSCS protection level. (a) Home buildings insurance is non-compulsory general insurance: 90% of a valid claim, so if there were a claim it would be 90% of the claim value; but the question asks about the insurer's failure, so the 90% applies to any outstanding claims or surrender values. If we apply 90% to the £350,000 sum insured, the maximum protection is £315,000 in the event of a claim. (b) Life assurance is long-term insurance: 100% protection, so the full £120,000 surrender value is protected. (c) Bank deposit: £85,000 per person per firm, so £100,000 is only 85% protected — £15,000 is lost. The key learning is that FSCS limits differ by product type.

3. What is the FSCS compensation limit for deposits (bank accounts and savings) held with a single authorised firm?

   • A
     £150,000 per person per authorised firm
   • B
     £85,000 per person per authorised firm
     Correct answer
   • C
     £50,000 per person per authorised firm
   • D
     Deposits are fully protected up to any amount with no upper limit
   Explanation

   The FSCS protects deposits (bank accounts and savings) up to £85,000 per person per authorised firm. This means if a customer holds £200,000 in a single bank that fails, only £85,000 is protected. For joint accounts, each account holder is treated separately, giving effective protection of £170,000. Temporary high balance protection of up to £1 million applies for up to 6 months for specific situations such as proceeds from a property sale or an insurance payout.